Chapter 8 Practice Questions

An insured keeps his truck in a garage. A deer gets trapped in the garage and, in an attempt to escape, climbs on top of the truck, breaking the windshield and causing several dents in the hood. The insured's Business Auto Coverage Form (BACF) provides physical damage coverage for specified causes of loss with a $100 deductible and collision with a $250 deductible. It will cost the insured $750 to replace the broken windshield and $1,200 to repair the dents. How much, if anything, will the business auto insurer pay for this loss? A. $0 B. $1,600 C. $1,700 D. $1,850

A. $0

Joan has a Business Auto Coverage Form (BACF). Which one of the following losses would be covered as auto physical damage? A. Damage to an engine that froze during the winter B. The cost to repair vehicle damage that results from hitting a deer C. The cost to repair a tire after a blowout on the road D. Collision damage while drag racing at the local raceway

B. The cost to repair vehicle damage that results from hitting a deer.

Joe Motors is an automobile repair shop. Which one of the following would be the best way for the owner to maintain the goodwill of its customers? A. Lowering the physical damage deductible under its business auto insurance. B. Purchasing garage liability insurance. C. Purchasing garagekeepers insurance. D. Raising liability limits under its business auto insurance.

C. Purchasing garage keepers insurance.

Three employees of a hardware store damaged a tile floor while moving concrete pavers from their delivery truck to an outdoor patio shop. Many of the pavers were also damaged during the move. How will the hardware store's Business Auto Coverage Form apply to this loss? A. The Business Auto Coverage Form does not provide liability coverage for property in transit. B. The Business Auto Coverage Form will cover only the damage to the pavers. C. The Business Auto Coverage Form will cover only the property liability for the damage to the tile floor. D. The Business Auto Coverage Form will pay for damage to the pavers as well damage to the floor.

C. The Business Auto Coverage Form will cover only the property liability for the damage to the tile floor.

The methodology for rating trucks, tractors, and trailers depends on whether the vehicle must be A. Identified by the appropriate coverage symbol. B. Specifically scheduled in the policy. C. Zone rated or not. D. Experience rated or not.

C. Zone rated or not.

The specified causes of loss coverage of the business auto policy includes coverage for which one of the following? A. Direct and accidental loss or damage resulting from overturn. B. Derailment of a conveyance transporting the insured vehicle. C. Glass breakage whether caused by collision or some other cause. D. Towing and labor costs resulting from disablement.

B. Derailment of a conveyance transporting the insured vehicle.

Wilson was driving his business auto when it was struck by a hit-and-run driver. He looked to his business auto policy for coverage for his injuries. Which one of the following symbols shown on his policy automatically provides such coverage? A. Symbol 2—Owned Autos Only B. Symbol 3—Owned Private Passenger Autos Only C. Symbol 5—Owned Autos Subject to No-Fault D. Symbol 6—Owned Autos Subject to a Compulsory Uninsured Motorists Law

D. Symbol 6--Owned Autos Subject to a Compulsory Uninsured Motorists Law

Which one of the following losses would be covered by the Business Auto Coverage Form (BACF)? A. Computers the insured has delivered are damaged by rain after the insured leaves them in an open area following delivery. B. Part of a load of plasma TV screens is damaged when the insured's truck stops suddenly and the TVs slide in the back of the truck. C. The insured has to pay an employee's medical bills because of an accident involving one of the insured's vehicles. D. The insured has agreed to pay for liability losses caused by the insured's negligence that a shipper may incur while the insured is hauling goods for the shipper.

D. The insured has agreed to pay for liability losses caused by the insured's negligence that a shipper by incur while the insured is hauling goods for the shipper.

Which one of the following sets of information is used in private passenger auto premium calculations for commercial auto physical damage? A. Age and gender of the driver B. Insurance limit and type of coverage C. Condition and age of the vehicle D. The vehicle's original cost new and the rating territory

D. The vehicle's original cost new and the rating territory

Which one of the following statements about the loss conditions in Section IV of the Business Auto Coverage Form (BACF) is true? A. Anyone seeking coverage under the form must submit to physical examinations by physicians as often as the insurer may reasonably request. B. If the insurer pays a loss, the named insured can waive the insurer's right of recovery against a negligent third party who caused the loss. C. Under certain circumstances, the named insured can commit the insurer to make payments for damages. D. The named insured may begin legal actions against the insurer before complying with all provisions of the coverage form.

A. Anyone seeking coverage under the form must submit to physical examinations by physicians as often as the insurer may reasonably request.

Physical damage and liability premiums are calculated for zone rated vehicles by doing which one of the following? A. Applying the primary factor to base premiums. B. Adding the primary and secondary factor to determine the combined factor. C. Subtracting the secondary factor from the primary factor. D. Multiplying the primary factor by a secondary factor based on the industry classification.

A. Applying the primary factor to base premiums.

Black and White Bakery (BWB) owns a private passenger vehicle and two vans, which are insured under an unendorsed Business Auto Coverage Form (BACF) with a $500,000 limit of insurance for liability coverage. James, a BWB employee, was driving his own vehicle to meet with a customer to discuss a large wedding that BWB was catering. His vehicle is insured under a Personal Auto Policy (PAP) with a $100,000 limit of insurance for liability coverage. On his way to the meeting James went through a stop sign and struck another vehicle, seriously injuring the driver. The other driver made a claim against James and BWB for $60,000 in bodily injury to himself and damage to his vehicle. The investigation determined that James was responsible for the accident. BWB was also liable because James was driving his vehicle in the course of employment for BWB at the time of the accident. How much, if any, will BWB's auto insurer pay for this accident? A. $0 B. $30,000 C. $50,000 D. $60,000

A. $0

In applying for the Business Auto Coverage Form (BACF), the insured mistakenly listed the age of one of its drivers as 28 instead of 22. Which one of the following correctly indicates whether coverage would be void if that driver were involved in an accident? A. Coverage would apply because the misrepresentation was not intentional. B. Coverage would not apply because the insurer may deny coverage based on misrepresentation of a material fact. C. Coverage would not apply because the insurer may deny coverage based on fraud by the insured. D. Coverage would apply because the insurer will pay any claim but subrogate against the insured later.

A. Coverage would apply because the misrepresentation was not intentional.

Big Corporation leases automobiles for its employees to drive on business. In addition, a few employees use their own cars in performing their job duties. Which one of the following automobile loss exposures exists for Big Corporation? A. Employers nonownership liability loss exposure B. Operations liability loss exposure C. Products and completed operations liability loss exposure D. Bailee loss exposure

A. Employers non ownership liability loss exposure.

Lime Green Paper Company owns three cars and a pickup truck. Lime Green's sales employees use their own vehicles for business. Lime Green is insured under a Business Auto Coverage Form (BACF) form with symbol 1—Any Auto for liability coverage and symbol 2—Owned Autos Only for physical damage and medical payments coverages. One of Lime Green's employees caused an accident while driving his own car on company business, damaging another auto and injuring the driver and two passengers. Lime Green's employee was injured in the accident, and his car was damaged. Which one of the following correctly indicates the coverage that Lime Green's BACF provides for this loss? A. Liability coverage for the damage to the other auto and injuries to the other driver and passengers B. Physical damage coverage for Lime Green's employee's car C. Medical payments coverage for Lime Green's employee D. Physical damage coverage for damage to the other auto

A. Liability coverage for the damage to the other auto and injuries to the other driver and passengers

Emily has just accepted a new position with Argot Industries (Argot). She is a sales representative and will be expected to call on current and prospective customers in her territory. Emily will use her own car to make the sales calls, and Argot will reimburse her for gas and tolls. She has a Personal Auto Policy (PAP) with the minimal mandatory liability limits, but is curious if she is covered under Argot's Business Auto Coverage Form (BACF) while driving her car for Argot business. Which one of the following endorsements, if any, would need to be part of Argot's BACF to provide liability coverage for Emily while she is driving her car for Argot's business? A. Employee Hired Auto (CA 20 54) B. Employees as Insureds (CA 99 33) C. No endorsement is required. D. Driver Other Car—Broadened Coverage for Named Individuals (CA 99 10)

B. Employees as Insureds(CA 99 33)

Kenneth, the named insured under a Business Auto Coverage Form (BACF) with symbol 1 shown for liability coverage, causes an automobile accident while driving a rental car on a business trip. Which one of the following correctly indicates whether Kenneth is covered under the liability insuring agreement of his BACF for this accident? A. Kenneth is not covered because liability coverage for rental cars used for business purposes is excluded. B. Kenneth is covered because Kenneth, the named insured, is an insured for any auto. C. Kenneth is covered because Kenneth is at fault for the accident. D. Kenneth is not covered because the rental car is not a specifically described auto.

B. Kenneth is covered because Kenneth, the named insured, is an insured for any auto.

Which one of the following losses would be covered by the Auto Medical Payments Coverage endorsement to the business auto policy? A. An employee of the insured is struck by an auto while driving one of the insured's autos. B. The insured is injured when his pickup falls on him as he is changing a tire. C. The insured is injured when he trips and falls exiting a covered auto. D. The insured is struck by a bicyclist while walking alongside the road.

C. The insured is injured when he trips and falls exiting a covered auto.

Alice has the use of a company car insured with a Business Auto Coverage Form with one endorsement, for uninsured motorists (UM) coverage. Alice was in an accident while driving the car and sustained the following losses: $ 200 - housekeeper for one day $ 300 - physical therapy and rehabilitation $ 400 - lost wages $1,000 - hospital bills $2,000 - pain and suffering The other driver was at fault but had no insurance. Assuming that no other insurance applies, how much can Alice collect under her employer's UM coverage? A. $1,000 B. $1,700 C. $1,900 D. $3,900

D. 3,900

In the liability coverage agreement of the Business Auto Coverage Form (BACF), the insurer expresses its three distinct duties. Which one of the following identifies one of those duties? A. A duty to renew the policy B. A duty to insure all vehicles owned by the named insured C. A duty to comply with laws and regulations D. A duty to pay covered pollution cost

D. A duty to pay covered pollution cost

Mitchell is a highway contractor whose company is covered with a workers compensation policy and an unendorsed Business Auto Coverage Form (BACF). Which one of the following losses would be covered by his business auto policy? A. Vandals damage a bulldozer at a construction site after the end of the workday. B. One of his employees is injured while making a delivery to a job site. C. One of his autos has an engine breakdown on the road and has to be repaired. D. An employee runs over a subcontractor's equipment with an owned auto.

D. An employee runs over a subcontractor's equipment with an owned auto.

Which one of the following property loss exposures can a business most likely avoid by leasing an auto instead of buying it? A. Cost of auto repairs B. Liability to parties injured by the operation of the auto C. Employers nonownership liability D. Decrease in or loss of the auto's value

D. Decrease in or loss of the auto's value.

In some no-fault states, the noneconomic loss threshold is expressed in terms of a dollar amount of damages resulting from the injury. In other states, the threshold is expressed as a A. Court award based on circumstances of each case. B. Benefit level. C. State mandated maximum amount. D. Definition of serious injury.

D. Definition of serious injury.

One of the conditions found in the Business Auto Coverage Form addresses the bankruptcy or insolvency of the named insured. Which one of the following statements about claims settlement in the event of bankruptcy of the insured is most accurate? A. If the insured is relieved through bankruptcy of an obligation to pay a liability claim, the claim is then sent to binding arbitration for settlement. B. If the insured is relieved through bankruptcy of an obligation to pay a liability claim, the insurer is also relieved of any obligation to pay the loss. C. If the insured is relieved through bankruptcy of an obligation to pay a liability claim, the plaintiff becomes an unsecured creditor of the insurer. D. If the insured is relieved through bankruptcy of an obligation to pay a liability claim, the insurer is still obligated to pay the loss.

D. If the insured is relieved through bankruptcy of an obligation to pay a liability claim, the insurer is still obligated to pay the loss.

Zelda has an automobile accident that is covered by a Business Auto Coverage Form. The accident results in a pollution expense due to gasoline spilling from the covered auto, as well as property damage and bodily injury to a third party. The cost for the bodily injury is $1,000 along with $2,000 property damage. The pollution clean-up cost is $5,000. Ignoring any deductible that may apply, how much will Zelda's insurer pay for these losses? A. $0 B. $1,000 C. $3,000 D. $8,000

d. $8,000